We at River Heights Consulting are dedicated to taking the friction out of the Distributor Channel. Here you will find stories, features and commentary on the world of Wholesale Distribution, Distributor Management, and Strategic Planning.

Monday, June 8, 2015

The Specialist – Expand your sales with the Niche

“Find a niche and work it!”

“We are a niche player.”

“Our niche is small.”

Work in distribution for any length of time and you will
hear one of these phrases bandied about.
Generally, when distributions hear the word – niche – they think of a
small company calling on a very narrow segment of business. To illustrate the point, here is what many
people would consider a “niche”: A
distributor who works exclusively in providing lighting products to gas stations. Small,
very narrowly focused and expert are all descriptions that come to mind.

I suggest Specialists change their definition of niche. What if we developed “niche products?" We change the definition from customer types
to product groups to achieve this new mentality. When a full line Electrical Distributor takes
on a product which has very limited application appeal, we have a “niche
product." The new niche would consist of
products not destined to be sold to everyone - products served up to a very
select group of customers, say 10 or 20 highly targeted accounts.

Manufacturers report that distributors traditionally don’t
do well with this type of product. At
the root of the problem lies the very nature of most distributor sales
organizations. Products are presented to
a group of salespeople and a number of generalized applications are
discussed. If the product doesn’t have
mass appeal, it gets lost in the shuffle.
Within a couple of weeks of the product launch, the product becomes long
forgotten somewhere in a pile of catalogs.
When stock orders are involved, it sits collecting dust in that special
odd ball section of the warehouse.

Because niche products offer an outstanding opportunity to
expand your business during these trying economic times, now is exactly the
right time to change your thinking. Three very compelling reasons make this
true.

Niche products earn high gross margin dollars

By their very nature, niche products are high gross margin
items. Limited competition and lack of
buying history put these into a class all their own. It is not uncommon to find gross margins
which are double the industry
average.

Niche products provide extra value to existing accounts

Problem solvers that solve a specific problem best describe the
product niche. During poor economic
times, customers appreciate your efforts in locating a “better mousetrap." Because they solve a problem, eliminate labor costs, or eliminate the need for
outsourcing, all of these create intrinsic value that can be measured in
dollars.

Niche products are often purchased from no-service or
low-service competitors

This type of product is traditionally not sold by a tough
competitor. Instead engineering and
maintenance departments find them via “Google search." And, often the product must be purchased with
a great deal of hassle-factor. Because
this may be the only product of its type purchased from their current supplier,
prices are high and service is marginal at best.

The Question

With all of these compelling reasons to get involved in
niche products, why have distributors traditionally faired so poorly in selling
them? While a number of factors weigh in
the answer to this question, solid evidence points to lack of a product-oriented
targeting process. Specialists provide
the best and most efficient means for establishing a meaningful target process
at this level.

Product Targeting is achieved when products, potential
application problems and customers are closely aligned. While most supplier reps understand the ins
and outs of their products, they often lack a detailed understanding of exactly
where the product is applied to the customer’s needs. Their territory size does not allow for
detailed customer level knowledge. To
illustrate this point, let’s imagine a new product designed for underwater
lighting. The supplier rep typically
understands the product specifications – the ability to withstand water
pressure to 30 meters, the ability to create 5 lumens, etc. But he typically lacks the ability to tie
underwater lighting to its useful applications in artificial crystal farming or
some other local application. Further,
he knows very few details about the customers in your territory. Any discussion of the product comes as a
footnote in some larger product/sales meeting. Salespeople don’t make a connection and no
sales are generated.

Getting Started

As a Specialist you hold the key to making things happen –
you provide a competitive advantage over other organizations. By tying product, application and customer
closely together, you can identify and close in on these opportunities during
tough times. They work best when
implemented one-on-one with your salespeople.
Join me on the high rocky cliffs La Quebrada cove as we prepare our
Acapulco-style swan dive into the process.

Step One – Identify the Product

Identify potential niche product targets from your existing
lines. Ask yourself, what cool product
exists somewhere in the footnotes of the master catalog that might fall through
the cracks – nearly every line has them but they never find their way into the
spotlight.

Step Two – Brainstorm Potential Applications

Ask yourself these questions. Where might this product be used? Are there applications that fall outside the
realm of normalcy? How is the problem
solved today? Have I seen something
similar but not as elegant?

Step Three – Identify Customers with Probably
Applications

Explore potential customer applications with your sales
team. These often happen informally on
the shoulder of other events such as joint calls, training sessions and trade
shows. A word of caution; your goal
falls not on gathering dozens of customers but rather a small handful who
happen to have special needs. If a customer
application is uncertain – move on. This exercise works on quality not quantity. Some salespeople will have no targets in
their territory.

Step Four – Arm the Salesperson with Clarifying Questions

After selecting the product target customer, provide your
salesperson with questions that can be asked during the course of normal
business. Things like; how is the
problem handled today? Or, does the
customer still run his process in a particular fashion?

Step Five – Present the Product

Bill the presentation as the culmination of research
conducted to add value, and you will achieve two things: a warm reception and
good will even if the sale does not happen. I recommend the Specialist participate in the
first of these presentations. Doing so
will allow further refinement of the presentation and will allow you to gather
potential competitive market information.
This may be critical to maximizing Gross Margin dollars.

Step Six – Document the Value

In tough economic times, documenting value only accelerates
in importance. If you were able to
eliminate manpower, energy usage, outsourcing or something else, turn it into a
mini-case study. During a recession,
customers want supply partners who improve their cash flow and eliminate
risk. Your efforts do both.

During a recession, many distributor sales teams “flail around” chasing after every
potential new customer they can identify.
It must be remembered; expanding your sales to existing customers is
five times easier than selling to a completely new customer. Plus, niche product targeting builds your value
with the customer which makes it harder for another distributor to steal your
business.